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Wall Street’s largest banks are enjoying a banner year in equities trading as the global artificial intelligence stock boom fuels activity across shares, ETFs and derivatives. Relaxed capital rules and increased lending to hedge funds have added momentum.

The five biggest investment banks generated about $67 billion in equities revenue through Sept. 30, according to company filings. That total already exceeds their record haul for all of 2025 by $7 billion, despite one quarter remaining.

Goldman Sachs, JPMorgan Chase and Morgan Stanley have captured the biggest portion of that revenue. The three banks produced a combined $52 billion in stock trading revenue, representing nearly 80% of the total.

“When it comes to the AI mega trade, the Big Three consider each other their main competitors, and that’s pretty much it,” Wells Fargo banking analyst Mike Mayo told CNBC. “They’ve been best positioned to take advantage of this market.”

Prime brokerage has become a crucial engine behind the surge. Through these operations, banks provide hedge funds with margin loans, securities lending and other services that allow funds to increase the size of their market positions.

The largest prime brokers serve major funds across numerous products and markets. Demand for borrowed capital tied to bets on AI hardware, hyperscalers and chip suppliers has climbed to new heights, according to bank executives.

At Goldman Sachs, revenue from equities financing activities surged 96% during the third quarter to a record $3.37 billion. JPMorgan and Morgan Stanley do not separately disclose that figure, but both reported a similar business dynamic.

JPMorgan CFO Jeremy Barnum agreed with an analyst’s description of “insatiable demand for capital” during the bank’s third quarter conference call. He said capital was being tapped through numerous mechanisms as AI remained an overwhelming market theme.

That demand has helped turn equity trading operations at the three banks from cyclical, transaction driven businesses into more durable lending engines with high margins. Their performance has widened the divide with competitors including Bank of America and Citigroup.

“For clients, the value isn’t just a price on one trade, it’s coverage and continuity,” Rachid Alaoui, JPMorgan global head of equities, told CNBC. He said clients want broad product access across regions, particularly during volatile or stressed markets.

Executing multibillion dollar wagers through leveraged swaps on volatile AI stocks or sector ETFs can require an enormous balance sheet. Trading executives said the biggest banks can absorb possible losses of $100 million without threatening their quarterly results.

Smaller or more specialized banks cannot necessarily underwrite individual trading risks of that size. That limitation can force them to reject business or surrender market share to institutions with greater scale and deeper balance sheets.

American prime brokers have also benefited as European banks, including Credit Suisse, retreated from the equities business. Bloomberg Intelligence analyst Herman Chan described prime brokerage as an ultimate scale business because strong equities franchises offer hedge funds a larger pool of opportunities.

Asia emerged as the fastest growing frontier for equities even as American markets focused on software and cloud computing giants. Institutional investors moved into South Korea and Taiwan to target memory chipmakers and semiconductor manufacturers supporting data center construction.

Goldman Sachs, JPMorgan and Morgan Stanley benefited from their operations across Tokyo, Hong Kong, Seoul and Mumbai. However, transaction taxes and stamp duties are counted as revenue, which trading executives said artificially inflates Asia prime brokerage totals.

Comparisons also remain difficult because banks do not share an agreed upon definition of equities trading revenue. Some include businesses such as clearing services that other banks leave out of their reported stock trading results.

The broader momentum follows a stock rally that began in October 2022, weeks before OpenAI released ChatGPT. Goldman Sachs and Morgan Stanley executives have said the AI buildout remains in its early years, although analysts warned a disappointment could hit those banks harder.

The International Monetary Fund estimated global hedge fund assets had reached $13 trillion and warned that leverage, crowded positions and correlated selling could create stability risks. JPMorgan CEO Jamie Dimon said in August that industry leverage was “the highest it’s ever been,” without calling it a threat to financial markets.

Several hedge funds faced forced unwinding during the summer, including Situational Awareness, which is run by former OpenAI researcher Leopold Aschenbrenner. Alaoui said prime brokers have learned to respond quickly to margin calls and reduce risk when markets turn against clients.

Trump administration regulators also eased leverage rules for the largest American banks, creating more room for balance sheet intensive operations such as prime brokerage. The revised rules were finalized in 2025, and banks were permitted to adopt them as early as January.

Stanford University finance professor Darrell Duffie said the regulatory relaxation left the system somewhat more leveraged, though not dramatically out of balance. Wall Street executives said collateral and frequent stress testing help them identify and manage possible trouble.

DISCLAIMER: GoldInvestors.news is not a registered investment, legal or tax advisor or broker/dealer. All investment/financial opinions expressed by GoldInvestors.news are from the personal research and experience of the owner of the site and are intended as educational material. Although best efforts are made to ensure that all information is accurate and up to date, occasionally unintended errors and misprints may occur.